Accountancy: Basic Knowledge

By O P Mishra


 
















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Accounting Equation

By O P Mishra
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  https://www.blogger.com/blog/post/edit/8860325726841885571/4923302030264149705 Accounting Equation MEANING OF AN ACCOUNTING EOUAIION An Accounting Equation is a mathematical expression which shows that the Assets of a firm are equal to the sum of its liabilities and the capital contributed by the owner. Assets = Liabilities or Claims of Outsiders + Capital or Owner’s Equity OR Capital = Assets – Liabilities OR Liabilities = Assets - Capital The above relationship is known as the Accounting Equation or the Balance Sheet An Accounting Equation is based on the 'Dual Aspect Principle', which that every business transaction has two aspects, a debit and a credit of equal amount. In other words, for every debit, there is a credit of equal amount in one or more accounts and vice-versa. Example: Suppose Harsh starts a business by investing 5,00,000 in cash and takes loan of 1,00,000 from the bank. Now, the assets (cash) in the busines...
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Admission of a Partner: Capital Adjustment

By O P Mishra
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  CAPITAL ADJUSTMENT: ADMISSION OF A PARTNER At the time of admission of a partner, it may be agreed between the partners that the capitals of the partners may be adjusted as per agreement. The adjustment may take any of the following forms: Case l. Determination of Capital of New Partner on the basis of Old Partners' Capital. Case 2. Adjustment of old Partners' capital on the basis of New Partner's capital. Case 3. Total capital of Reconstituted Firm is given which is to be adjusted in New Ratio. Case 1: Determination of Capital of New Partner on the basis of old partners’ capital Sometimes, at the time of admission, the capital of the new partner is not given and expected to bring capital on the basis of capitals of old partners. There can be net) situations: IA. When the New Partner is required to bring Proportionate Capital. (In this case, Capital of Firm is calculated on the basis of total adjusted capital of old partners), 1B. When the New Partner has to ...
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Partnership: Fundamental -01

By O P Mishra
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  ACCOUNTING FOR PARTNERSHIP Section 4 of Partnership Act 1932                 “Partnership is a relation between persons who have agreed to share the profits of a lawful business carried on by all or any of them acting for all”.             Persons who have entered into partnership with one another are individually called ‘partners’ and collectively called ‘firm’.             The name under which the business is carried, is called the ‘firm’s name’. A partnership firm has no separate legal entity, apart from the partners constituting it. Thus, the essential features of partnership are:  1. Two or More Persons  4. Mutual Agency 2. Agreement                    5. Sharing of Profit 3. Business               ...
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